Britain’s leading mobile operator Three UK has published six months of data containing many ups and downs, including a strong 5G home broadband business, and claims to have made progress in the first half of the year, but blames “dysfunctional structures” for its “dismal” ranking of the UK’s 5G mobile market and an inability to make sustained investment to improve the situation.
For the first half of the year ending June 30, 2024, the company said its active customer base grew 3% year-on-year to 352,000, bringing its total to 10.9 million, up 400,000, amid fierce competition from mobile network virtual operators and other providers.
The total number of contracted customers increased by 5% year-on-year to 9.2 million (H1 2023: 8.8 million), driven by growth in the Smarty value-added mobile services, business-to-business (B2B) services and 5G home broadband divisions.
This increase in subscribers helped revenue rise to £1,335 million, up 9% compared to the first half of 2023. Net customer revenue increased 6% and mobile revenue increased 10%, driven by increased customer numbers in certain customer segments.
First half total profit was £879 million, up 9% year-on-year, while operating expenses increased 5% to £548 million due to network expansion and cost inflation. As a result, Reported EBITDA increased 31% year-on-year to £213 million, while Reported EBIT loss decreased 61% year-on-year to £30 million. Reported CapEx was £230 million, down 16% year-on-year, with EBITDA-CapEx down £17 million, making cash flow negative for the first time since 2020.
Looking at the highlights of the first half, the company said it was characterised by continued focus on capital expenditure management by focusing spending on regulatory requirements such as avoiding high risk vendor (HRV) investments and shared rural networks (SRNs).
Three said it has met its goal of keeping HRV traffic on its wireless network below 35% by July 2024 and has replaced equipment at more than 600 sites to comply with HRV requirements. Currently, more than 900 sites have had equipment replaced. In terms of SRN, the company said it has completed the build-out of 311 additional sites, of which 269 are currently operational as part of the program.
In terms of 5G, Three UK now has 4,900 locations in 656 towns and cities, 500 more than at the end of the first half of 2023, reaching 62% population coverage. The company is also expanding its 5G and 4G networks in London Underground stations.
However, commenting on the results, Three UK CEO Robert Finnegan was sharply critical of the current state of the industry in the UK and called on UK authorities to approve the company’s proposed merger with Vodafone, which he said would provide some mitigation to the situation.
“We made progress in the first half of the year, experiencing growth in certain areas such as Smarty, 5G home broadband and B2B,” he said. “Despite reducing capital expenditure, we continued to incur losses due to high inflation in our network operating costs. Our cash flow has been negative since 2020 and costs have almost doubled in five years, meaning investment in our network is unsustainable.”
“UK mobile networks ranked 22nd worstand “We rank second out of 25 European companies for 5G speeds and availability, and dysfunctional market structures mean we cannot make sustained investment to improve this situation,” Finnegan said. “The combination with Vodafone will enable £11 billion worth of investment in digital infrastructure, creating a best-in-class 5G network in the UK and contributing to the growth of the UK economy.”
